RBI monetary policy: Dec MPC highlights and what to expect on Feb 7

RBI prepares to announce its latest monetary policy decision on Feb 7. This will be the first meeting held under the leadership of Governor Sanjay Malhotra

As the Reserve Bank of India (RBI) prepares to announce its latest monetary policy decision on February 7 (Friday), here’s a look at the key takeaways from the last Monetary Policy Committee (MPC) meeting and what to expect this time.

 

Dec 6 RBI monetary policy meet highlights

In its fifth bi-monthly monetary policy of financial year 2024-25 (FY25), the six-member MPC, led by then RBI Governor Shaktikanta Das, kept the benchmark repo rate unchanged at 6.5 per cent for the eleventh straight time by a vote of 4 to 2. The committee also maintained a ‘neutral’ policy stance while emphasising its commitment to bringing inflation in line with the target while supporting economic growth.  RBI Monetary Policy Committe Meeting LIVE

 

A key measure in the December policy was a 50 basis point (bps) cut in the cash reserve ratio (CRR) to 4 per cent, aimed at injecting Rs 1.16 lakh crore into the banking system in two tranches.  

 

Key policy announcements

Apart from the repo rate, the RBI in December, also maintained the standing deposit facility (SDF) rate at 6.25 per cent. The marginal standing facility (MSF) and bank rate were also left unchanged at 6.75 per cent. 

The MPC, in a 4:2 vote, decided to maintain the status quo. The CRR cut of 50 basis points to 4 per cent was a key move, expected to inject liquidity worth Rs 1.16 trillion into the system. 

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RBI’s GDP growth estimates

FY25: 6.6 per cent

Q3FY25: 6.8 per cent

Q4FY25: 7.2 per cent

Q1FY26: 6.9 per cent

Q2FY26: 7.3 per cent

 

RBI’s CPI inflation forecast

FY25:  4.8 per cent

Q3FY25:  5.7 per cent

Q4FY25:  4.5 per cent

Q1FY26:  4.6 per cent

Q2FY26: 4 per cent

 

RBI monetary policy meet Feb 7 expectations

The February 5-7 MPC meeting is the first under new RBI Governor Sanjay Malhotra, who took charge in mid-December. With an almost entirely new six-member MPC, analysts expect a possible departure from Shaktikanta Das’ hawkish stance.

According to Bloomberg, Malhotra may prioritise economic growth over inflation control, possibly cutting interest rates for the first time in two years.

 

Most economists surveyed by Bloomberg predict a 25 bps rate cut to 6.25 per cent, while some analysts believe there’s a chance of a larger 50 bps cut. The RBI’s stance may also shift its focus towards boosting economic growth amid global uncertainties. The final decision will be announced tomorrow, February 7. 

New RBI Governor Sanjay Malhotra expected to begin interest rate cuts

  A report by Bank of Baroda, as cited by news agency ANI, also expects the RBI to cut the repo rate by 25 bps. The report noted that inflation, the primary concern of monetary policy, is showing signs of moderation, particularly due to lower prices of essential vegetables like tomatoes, onions, and potatoes. This has helped reduce price volatility in the Consumer Price Index (CPI), giving the RBI room to consider a rate cut. However, any reduction will be gradual, depending on further economic data.

 

Since the last policy meeting, both global and domestic factors have influenced financial markets. Rising geopolitical tensions, including potential tariffs between major economies, have caused volatility in asset markets and impacted the Indian rupee. The strengthening of the US dollar has also contributed to this instability.

 

Domestically, banks are facing liquidity pressures, with slower deposit growth and tightening conditions. While credit growth is stabilising, domestic economic growth remains uneven, with premium goods continuing to drive consumption trends.

  Live updates will be available on the Business Standard website.    ALSO READ: RBI directs NBFCs to disclose maximum loan charges, seek board approval